Get down with TPP
At the turn of the century, New Zealand, Singapore, and Chile began talks to form a free trade partnership. Brunei joined in on the discussions in 2005 and later that year, those four countries—known as the P-4— signed the Trans-Pacific Strategic Economic Partnership Agreement, a deal designed to coordinate their trade policies and reduce tariffs amongst participant countries. Governments around the world watched the developments closely, and several expressed their own interests in joining in— such that by 2010, four countries, the US, Australia, Peru and Vietnam, joined the original P-4 in negotiating a wider trade deal. Now dubbed the TPP, the negotiations grew to include Malaysia later that year. By 2012, Canada and Mexico entered the discussions, and in 2013, the final member, Japan, the final member, came on board.
The TPP is designed to eliminate trade barriers through direct measures like reducing or eliminating tariffs, as well as through more indirect means, like strengthening intellectual property rights and addressing issues around foreign direct investment. And while it’s possible to discuss the deal in broad terms, and in terms of what free trade signifies in general, it’s still difficult to get into a discussion on the specifics of the deal. Negotiators finally reached an agreement in early October 2015, but the public remains unaware as to what exactly that agreement looks like. The public has been kept largely in the dark on specifics of the deal, under the assumption that “prematurely” involving the public could amount to an effective death sentence for the deal.
In the US, “Fast Track” negotiating authority, also known as Trade Promotion Authority (TPA), enables the President to participate and negotiate on international agreements without Congressional participation. Congress, which has to approve any international agreement, is ultimately given a completed deal that they can either approve or reject— amendments or filibusters are not permitted.
That negotiators were even able to come to an agreement was monumental—several sticking points seemed, at times, insurmountable. North America’s local content laws for automobile manufacturing, Japan’s rice protectionism, and Canada’s system of dairy supply management were just some of the more salient obstacles negotiators had to work through.
As significant as these hurdles were, there are still many more to come—at least twelve of them, to be precise - as the government of each signatory will have to debate and ratify the treaty in accordance with its own laws.
In the US, members of Congress have had very controlled and limited access to TPP documents, upon which they may not vote until 2016. While some signatories may beat the US to ratification, others may be even slower to review and vote on it—in Vietnam, for example, ratification may take about 18 months. And while analysts currently expect the legislative bodies of all the treaty signatories to approve the deal, once the full TPP document is published in all its translations, likely to happen in early November, it will become easier to predict how the votes will go.
The passage of the TPP would have far-reaching implications, especially on intellectual property rights and the manufacturing, automotive, pharmaceutical, and agricultural sectors of each country. Given that the TPP was designed as a “living” agreement—one that could be updated when it becomes necessary to do so, and one that could include additional countries should they be interested in joining, non-signatories in the region are watching the TPP developments closely. Indeed, the President of the Philippines has already indicated his interest in having his country join the TPP, while analysts are eagerly scrutinizing every move and reaction from China, who some believe may join the TPP at a later date. Indeed, several analyses outlining the potential winners and losers of a TPP deal have pointed to these sorts of regional non-signatories—China and India in particular—as being some of the biggest potential “losers” from the deal.
TPP and agriculture
In terms of agriculture, the TPP is expected to have a significant effect on all signatories. The agreement will reduce non-tariff barriers to agricultural trade, such as non-science based trade restrictions. In this case, non-scientific trade restrictions are constraints that are supposedly based on sanitary and phytosanitary standards (SPS), but are not actually formed using transparent or scientific methods, meaning that they, ultimately, enable discriminatory trade measures. The TPP will build on and affirm the World Trade Organization’s (WTO) SPS measures, and aim to protect national sovereignty in the formation of SPS standards, while at the same time establishing rules that will ensure that SPS measures are science-based—and therefore non-discriminatory—and implemented transparently.
While these sorts of non-tariff barriers are certainly significant obstacles to international agricultural trade, most proponents of the deal are more excited about what the TPP will mean in terms of reducing actual tariffs. Some of the most significant and widely discussed agricultural tariff reductions will be for beef, chicken, rice, and soybeans. Much of the trade flows for these goods are from West (including Australia and New Zealand) to East, although East Asian farmers may enjoy some modest gains for some goods, too.
Japan is the world’s fourth-largest importer of veal and beef, and its standard import tariff of 38.5 percent for beef products can stretch to as high as 50 percent, depending on trade conditions. With TPP, these tariffs would be slashed to 9 percent over 16 years, a major victory for the beef producing countries of the TPP. Australia, whose cattle ranchers export nearly 2.5 times as much beef as the country consumes, is the top source of beef imported into Japan, with Australian beef exports to Japan amounting to $1.6 billion in 2014. The US is the second-most important exporter to Japanese beef markets, with sales to the East Asian country amounting to $1.5 billion in 2014. And while New Zealand’s export figures for beef may be more modest than those of beef powerhouses the US and Australia, it did export more than $230 million of beef products in 2014, with the top recipient being Japan ($43 million).
Japan also has a voracious appetite for poultry products, and is actually the world’s top chicken importer despite import tariffs as high as 21.3 percent. With the TPP, Japanese poultry import tariffs will be eliminated within 6 to 13 years, enabling improved access to that market for US poultry producers (who exported $127 million in poultry and egg products to Japan in 2014), as well as Canadian poultry producers (who export only a small proportion of total production, but do export some chicken to Japan).
While Japan’s chicken imports dwarf those of Vietnam, it has been Vietnam’s poultry sub-sector that has been the most vocal about the potential dangers of the TPP. Vietnamese poultry imports represent only a fraction of total poultry consumption, but Vietnamese poultry producers are already pointing fingers at their American counterparts, accusing them of flooding the market with too-cheap chicken products. In fact, Vietnamese chicken farmers plan to file a formal claim against the Americans, accusing them of dumping chicken into the market at prices even lower than what those products would fetch in the US—an allegation that the US denies. While it’s not yet clear what will come of the case, it does provide an interesting glimpse into what the effects of the TPP might be for farmers in the poorer signatory nations.
Under the TPP, the US will eliminate its poultry import tariffs, which are as high as 18.7 percent, within the next decade, while Canada will allow greater duty-free access to its highly protected chicken market. While the elimination and reduction of these tariffs has received pushback from producers in both countries, the reality is, none of the other signatories are particularly significant exporters of poultry products. Chile, the only signatory (other than the United States) that cracks the top-15 of poultry meat exporters, already has duty-free access to US chicken markets, but could feasibly increase its share of exports to Canada.
Vietnam, Japan, and Malaysia’s positions as the world’s third, seventh, and tenth largest importers of soybean meal, respectively, have soy producers across the US and Canada excited at the prospect of the TPP. Japan will eliminate its 4.2 percent duty on soybean meal imports and reduce its even higher import tariffs on soybean oil and other products. Both Vietnam and Malaysia already allow for duty-free access for soybean meal imports, but they will slash their duties on imported soy products, Malaysia immediately and Vietnam within 3 to 11 years. Rice is a staple in all of the East Asian TPP signatories, and the deal would bring about major changes in that crop market.
Vietnam, typically the world’s third-largest exporter of rice, has tariffs on the grain as high as 40 percent which would be eliminated immediately under the TPP, which may not have a significant effect given the limited nature of Vietnamese rice imports. Malaysia, which produces a significant amount of rice (but not enough to satiate demand) has rice import tariffs in the 15 to 40 percent range, which would be eliminated within a decade. The US, which is a significant producer of rice but still imports roughly 800,000 tonnes of the grain (2015/2016 season), will eliminate its import tariffs, which can be as high as 11.2 percent, within 10 years. While Malaysia and Vietnam already have a preferential trade relationship through the ASEAN (Association of Southeast Asian Nations) Free Trade Area, the further reduction in import tariffs offered by TPP could give Vietnam better access to Malaysian rice markets. Furthermore, the deal could help Vietnamese rice—production of which has been rising steadily over the past twenty years—better access to US markets.
Japan’s rice situation is more complicated. Rice is an extremely sensitive crop in the country, and throughout the TPP negotiations, the government has repeatedly reassured its rice farmers that they would be supported and protected. In the deal, Japan will maintain its import tariffs on rice, about ¥341/kilogram ($2.87/kilogram), but will increase the share of duty-free rice that can be imported into the country from the US and Australia.
Much of the emphasis on the potential gains from the TPP has focused on what countries like the US, Canada, and Australia will gain from increased access to markets like Japan and Vietnam. And indeed, the comparative size, industrialization and export-orientedness of their agricultural systems makes their potential gains significant and obvious. But that’s not to say that the other signatories are walking into a deal with the odds stacked against them— there is some room for gains from East and Southeast Asian signatories. Benefits to such signatories are most apparent in non-agricultural sectors; for Vietnam and Malaysia, that means manufacturing, and for Japan, the greatest gains are for its automotive industry.
On this same note, Japan’s agriculture minister has assured his country’s farmers that the deal will also prove beneficial to beef, rice, tea, and fish exporters.And while Japan is a major importer of all of these goods, it also is a significant exporter of high-grade, high-value products within each of those segments. The Japanese agricultural opportunity might be most significant within seafood, where domestic consumption of fish products has seen a steady decline over the past several years, as Japanese consumers develop a greater taste for chicken, pork, and beef. This demand shift has enabled, and will continue to enable, an increase in seafood exports, especially of high-value fish products like scallops. Similarly, fellow major fish producers Vietnam and Chile may benefit from greater access to TPP seafood markets.
At the same time, it is these increased opportunities in fishing, as well as one of Malaysia’s greatest potential agriculturerelated gains from the TPP—palm oil production—that are also stirring controversy among environmental groups.
In the US, the TPP has strong support from several agricultural groups including the American Feed Association, and the American Soybean Association, as well as the National Cattlemen’s Beef Association and the National Chicken Council. Several of the country’s largest companies involved in agriculture, such as Cargill and Dow Chemicals, have also voiced their support for the deal. Many more industry participants are reserving their judgment until they can get their hands on a copy of the TPP. And many others, still, have made clear their disapproval of their deal.
The National Farmers Union is staunchly opposed to the TPP should the document lack meaningful language concerning currency manipulation (and analysts expect that it will), which they see as a major threat to their ability to compete internationally. The non-profit Family Farm Defenders has also been a vocal opponent to the TPP, arguing that the deal would enable cheap, potentially unsafe agricultural products to flood into the US, harming local small- and medium-sized farmers. Similarly, anti-GMO and pro-organic lobbies have voiced their concerns on the implications of the deal, while groups like the sustainability-minded Institute for Agriculture and Trade Policy have expressed their disapproval for the deal, which they argue is a threat to food sovereignty and focused on supporting corporations rather than consumers.
One of the more contentious agricultural issues within the TPP is around seeds and plant varietal patenting. Plant varietal patenting can be highly controversial given its relationship to food security and farmers’ rights to replant their own seed. Earlier this month, the TPP chapter on intellectual property was leaked to the public via Wikileaks, and the excerpt elicited strong criticisms from some. Although the document indicated that signatories were in disagreement about some details, there is a strong possibility that each TPP party may, upon signing the agreement, have to accede to several IP-protecting treaties such as the International Convention for the Protection of New Varieties of Plants (UPOV) which provides and promotes a system of plant variety protection. Though all but two of the TPP countries, Malaysia and Brunei, are already signatories of UPOV, not all have ratified its 1991 convention—Chile, Mexico, and New Zealand are party only to the 1978 agreement. Ratifying the TPP, therefore, may require all twelve countries to agree to the more precise and strict plant varietal language that exists in the 1991 documents. Furthermore, ratification of the TPP may require participants to make available patents for new plant varieties.
Broadly, the TPP does not present as much of a challenge to US farmers as it does to farmers in less-developed countries. Given US farmers’ comparative advantage in the production of many crops, and the industrialized nature of farming in the country, it will be difficult for some signatories to compete on several food items. As noted earlier, the production systems of goods like chicken in markets like Vietnam may be under the greatest threat by the deal.
And while these agricultural concerns are certainly significant, resistance to the TPP actually appears strongest outside of agriculture. The most vociferous opposition has come from environmental groups like the Sierra Club, who argue the deal doesn’t do enough to prevent illegal, environmentally harmful activities, from groups concerned about the potential tightening of intellectual property laws, from factory employees in places like the US and Canada that are concerned that their jobs will be outsourced, and from those who oppose the controversial investor-state dispute settlement mechanism, which they gives too much power to corporations while eroding the sovereignty of states.
The most overarching of criticisms (other than those related to an opposition of free trade) —that the TPP is undemocratic and neglects the average citizen in each signatory—is complex and difficult to dispel. The public has indeed been kept in the dark, but only in the hopes of accelerating a trade deal which its negotiators believe is a fundamental good.
The TPP is emerging in a major election year for several of the parties—Canada’s general election is just days away, while 2016 will mark general elections for the US and Peru, and parliamentary elections in Japan and Australia. Citizens of each of these countries, therefore, will be able to express their thoughts on the deal, and their thoughts on the system of negotiation employed, with resounding clarity.